Buying a vacation home is a great idea if you have the time and money to devote to its care and upkeep. If you’ve ever dreamt of retiring to the beach, keep reading for practical advice on how to do just that without robbing yourself of your savings.
Start by Knowing How Much You Can Afford
There’s almost always a difference between what you can afford and what you think you can afford. When you’re in the market for a new house — especially a second home — there are numerous expenses beyond the mortgage. This online calculator can give you a starting point based on your income and expenses. You will also need to consider insurance, utility costs, lawn care, and general maintenance and upkeep.
Depending on where you choose to buy your second home, these costs can vary greatly. A vacation property in the city, for instance, may be less expensive to insure than a mountain getaway that’s miles from the nearest fire department. A hilltop cabin, however, may not require the same level of insurance coverage as a beach bungalow. Investopedia notes that a yearly premium of $10,000 is not uncommon throughout Florida but claims that homes along North Carolina’s eastern coast may be more affordable where insurance is concerned. If you plan to rent your vacation home to others during your absence, you may also be required to purchase landlord insurance. Knowing what you can pay for will keep you from the heartbreak of looking at (and turning away from) houses you love that can’t truly afford.
Determine How Long You’ll Stay Each Year
Chances are, you won’t reside in your vacation home the entire year. However, you will need to know exactly how much use you’ll get out of it before you take the plunge. According to Vacations Made Easy, many retirees live in their second home for six months or more. During this time, you’ll also need to continue to pay your current mortgage and utilities.
Determine ahead of time whether you will be able to rent out one or both of your homes during the months you’re not there. Your primary residence may make the perfect short-term rental while your vacation home may appeal to families looking for an affordable house or condominium during the warm summer months. Today recently spoke with a few people who rent their homes through VRBO or AirBnB if you’re unsure about the process.
Keep Your Ongoing Costs Down with Research and Planning
Despite the higher costs of dual home ownership, there are ways to keep them down at one or both homes to make it more affordable. If you know the general area you would like to purchase, map out the location of each potential property to determine its distance from emergency services; the closer, the better. You can further save on insurance premiums by installing smoke detectors and carbon monoxide alarms. Other ways to reduce your out-of-pocket expenses include performing regular home maintenance, such as keeping the gutters clean, changing the air filters, and having the fireplace (if applicable) cleaned regularly. Zebra Insurance offers more money-saving home maintenance tips.
When you operate either residence as a vacation rental, make sure to price it wisely to account for any service fees incurred through your rental property management firm or house cleaning service. It’s also wise to collect an up-front damage deposit.
Should You Buy?
More than just the question of whether you can afford the property is whether you will get your money’s worth. When you own a second home, you will likely feel more obligated to spend time there even when you’d rather see new places. If you prefer to keep things new and exciting, buying a second home may not be the best use of your money. Further, real property is not a liquid investment and, as The Motley Fool reports, may wind up costing you more than you bargained — or budgeted — for.
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